Malaysia’s inflation, the consumer price index (CPI), increased 3.4% in June 2022 from a year earlier, led by the rise in food prices of 6.1%, does not reflect the actual situation due to controlled pricing of certain essential items. The June producer price index to be announced, which rose by 11.2% in May, will reflect a more accurate picture of the current situation.
DAP regrets that the government has refused to set up a RM 5 billion Price Stabilisation Fund as stated in a parliamentary reply to me by the Finance Ministry. Instead, RM1 billion is provided to chicken and poultry breeders to stabilise chicken and egg prices at controlled prices, until August 2022. Despite that, supply shortages are still expected because chicken and eggs are still sold below cost.
This is due to the rise in global food production inputs such as maize (14.8%), wheat (60.9%) and soybean (19.9%), which are the largest compositions in the preparation of chicken feedstuffs has caused chicken prices to increase by 17.2%. Similarly, pork prices went up by 14.6% in June as compared to 10.2% in the previous month.
The government continues to disclaim any responsibility by blaming soaring food prices on escalating food production inputs due to the war in Ukraine, supply shortages, the disruption in the supply chain caused by the COVID-19 lockdowns in China and high logistic costs. However, no mention is made of the negative impact of the depreciating ringgit and the acute labour shortage in hiking up the inflation rate.
Without a Price Stabilisation Fund, strengthening of the ringgit, resolving the severe worker shortage, and ending the government’s policy flip-flops, the cost of living will continue to escalate. Apart from the B40, the M40 and the SMEs will be the biggest losers because no government assistance is offered.
The declining ringgit has only added import costs to businesses whilst the acute labour shortage has not only adversely affected economic growth, with businesses not daring to accept new orders but also driven up labour costs. Against two of our largest trading partners, the ringgit has fallen to a five-year low against the US dollar on Tuesday to RM4.46 whilst the Singapore dollar is inching to its record low of RM3.21.
The ringgit’s depreciation against two of our three biggest trading partners in the US and Singapore, will only cause inflation to spike up. An indicator of how bad the current situation is can be seen by the price of 5kg of cooking oil at RM19 under Pakatan Harapan but now it is sold at more than RM45.
The government had tried to imply that whilst the inflation rate has increased to 3.4% in June, it is still lower compared to Singapore’s 5.6 %. Such comparison is meaningless when the Purchasing Power Parity (PPP) per capita of Singapore is almost 4 times that of Malaysia.